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BB&T's Allison: A Free Market Could Have Prevented This

Some observers are concerned about BB&T's large commercial loan exposure, as signs of cracks in the commercial market are beginning to show. The company set aside an additional $528 million in the fourth quarter for loan losses, compared to $184 million a year earlier.

"In 2009, the next big problem for banks, including BB&T, is commercial loans and how that plays out," says Tom Hepner, an investment advisor at Ruggie Wealth Management, which does not own BB&T shares. "With concentration in these they are probably going to show some exposures to loans that were approved in a very dynamic growing period."

Kevin Fitzsimmons, an analyst at Sandler O'Neill & Partners, also maintains a sell rating on BB&T, due to the general residential housing malaise, despite his fondness for the company and Allison.

A Reluctant TARP Recipient

Allison has been vehemently opposed to the Treasury's Capital Purchase Program, in which the government has bought preferred equity stakes in banks, but the company ultimately participated under pressure from regulators. BB&T also believed that the public perception of rejecting the government's aid would be that something was wrong with the company, he says.

BB&T received $3.1 billion in TARP fund in the fourth quarter. The company says it will use the capital to expand its lending business, but the challenge is making "good loans," Allison says. Congress has been critical of the banks for "hoarding" the money or using it to acquire troubled institutions.

"This is a tough environment to make good loans because the people you would like to lend money to unfortunately don't want to borrow it because they're scared," he says. Still, BB&T is "picking up a lot of business -- a lot of clients that had long-term relationships with ... competitors," he continues. "So in that sense it's actually been good for us."